Posted by: Rob Hof on June 9, 2005

Nick Carr has an interesting piece on BusinessWeek Online today that suggests Amazon.com spin off its software business, which helps other merchants sell on Amazon’s site. His argument: That business is very different from Amazon’s retail business and is beset with conflicts.

True enough. But in recommending a spinoff, I think he misses a key point: The two diverse businesses inside Amazon benefit customers—and in the long run, that in turn will benefit shareholders.

Nick writes that many merchants selling on Amazon's site must "worry about directing their customers to the storefront of a price-slashing competitor intent on expanding into every more product categories." Well, boo-hoo. That's how the retail world works today, and will even more so in the future. Very few retailers will have the power to force customers to buy only from their most profitable channel.

When Circuit City was selling on Amazon, for example, it got a $300 digital camera sale from me because Amazon itself didn't have it in stock. A few weeks later, after Circuit City no longer was selling on Amazon, it failed to get my followup purchase of a memory card. Another merchant did.

Offering a site where you can find a wide range of merchandise from a wide range of merchants is what customers want. Some customers may be confused about whom they're buying from on Amazon.com, as Nick claims--though honestly, it looks pretty clear to me--but I think most are saying they want the choice anyway.

It's why Google is the $80 billion phenom it is: Merchants realize they're getting access to buyers who type in keywords to research and shop around before they buy--instead of visiting those merchants' sites directly. It's why eBay is worth $53 billion, and why it's expanding into new selling venues like classified-ad sites and shopping comparison sites. Indeed, the reason eBay paid $620 million last week for Shopping.com is precisely because this shopping service clearly appeals to consumers.

I'm certainly no apologist for Amazon. It has some real challenges, such as increasingly capable competitors and difficulty in expanding its brand outside media, that have made it a frustrating stock to hold lately. But as a customer, I'm pretty satisfied. And that's ultimately what should matter--even to shareholders.

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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.